FIRMS AND FLEXIBILITY

The United States and France have very similar labor productivity levels while there are considerable differences between the firm‐size distributions and firm dynamics in the two countries. To reconcile these observations we introduce a joint model of endogenous entrepreneurship and firm‐size dynamics with firing costs, unemployment benefits, entry costs, and a tax wedge between wages and labor costs. We use our model to analyze the role of these rigitidies in explaining firm dynamics and productivity patterns in the United States and France. We find that our model with all rigidities goes a long way in accounting for firm‐size differentials between the United States and France while generating similar labor productivity outcomes. (JEL C78, D21, E24, J6)     

MINIMUM WAGES,IMPORT STATUS,AND FIRMS' INNOVATION: THEORY AND EVIDENCE FROM CHINA

This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. We develop an open‐economy R&D‐based growth model and obtain the following result: raising the minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. We test this result using city‐level data on minimum wages and firm‐level patent data in China. In accordance with our theory, we find that raising the minimum wage is associated with more innovation by importing firms and less by non‐importing firms. This result survives a battery of robustness checks. (JEL E24, F43, O31)     

OFFSHORING PRODUCTION: A SIMPLE MODEL OF WAGES,PRODUCTIVITY, AND GROWTH

We examine the relationship between offshoring and the labor market in an occupational choice model of trade and endogenous growth where workers are employed on the basis of their individual skill levels. Trade liberalization leads to offshoring and reduces employment in the manufacturing sector. Displaced workers move into traditional and innovation sectors according to their skill levels, shaping real wages and aggregate productivity in the manufacturing sector. The paper aims to show how inter‐sectoral labor market adjustments, highlighted by skill heterogeneity, could be a possible explanation for the simultaneous rise in productivity and reduction in real wages that have coincided with the sharp escalation of offshoring activities in the U.S. manufacturing sector since 2004. (JEL F16, F23, J24)     

ANTI‐POACHING AGREEMENTS IN LABOR MARKETS

We analyze competition for experienced workers among wage‐setting firms. The firms can design poaching offers with higher wages to workers who switch from rivals relative to wages paid to their own existing employees. We evaluate the profit and welfare effects of anti‐poaching agreements that eliminate poaching offers as a recruiting method. Anti‐poaching agreements increase industry profits, whereas workers are made worse off. We show that the effects of anti‐poaching agreements on total welfare are determined by the magnitude of workers' switching costs and the productivity change associated with switching employers. (JEL L41, L40, J42)     

Rural Migration,Rapid Growth,and Fear of Crime*

Abstract Although much research on rural “boomtowns” explores differences between rapid‐growth communities and more stable communities, it is logical to consider that residents within rural boomtowns experience community transitions in different ways. We examine a specific outcome, fear of crime, across three categories of community residents with different migration histories: lifetime residents, migrants who joined the boomtown community during its period of rapid growth, and post‐boom period migrants. This perspective is particularly interesting, given the likelihood that these three different categories of residents have had substantially different community experiences. Making use of survey data from two intermountain West communities that represent resource‐dependent transitions during the 1970s and 1980s (Evanston, Wyoming and Delta, Utah), we find that boom migrants express greater fear of crime than longer‐term residents or post‐boom migrants. The findings suggest that the longer‐term decline in fear of crime in “post‐boom” periods is not equal among residents.     

BETWEEN SCYLLA AND CHARYBDIS: INCOME DISTRIBUTION,CONSUMER CREDIT,AND BUSINESS CYCLES

We introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios. Growing inequality produces debt‐led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend. Instead, when inequality rises but the banking sector is highly regulated, aggregate demand and output fall. Our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy: acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy. (JEL C63, D31, E62, G01)     

WORKFORCE COMPOSITION AND FIRM PRODUCTIVITY: EVIDENCE FROM TAIWAN

We study the relationship between workforce composition and firm productivity based on a new employee‐employer‐matched data set, using an array of workforce characteristics and three alternative measures of firm productivity. While firm age is not essential for the performance of firms, those of smaller size and those in the steel and transportation industries outperform others. Moreover, labor quality, particularly the middle‐aged with higher education, contributes significantly to firms' productivity. Furthermore, economic incentives and market competition both play important roles in the performance of firms. Finally, there is an employer‐size premium with larger firms paying higher wages and nonwage benefits. (JEL C33, D20, J30)     

LABOR SUPPLY ESTIMATION BIASES FROM DISREGARDING NONWAGE BENEFITS

Labor supply models and research underpinned by labor supply decisions often assume that workers' choices are functions of wage and wage offers. However, the literature shows evidence that such decisions at least partly depend on nonwage benefits encompassed in jobs and occupations. In this paper, I develop and estimate a stochastic dynamic model of occupation and job choice, where nonwage benefits are directly incorporated into the decision alongside wages (a full model). Nested within the full model is a wage model, which represents the common practice in the literature of basing selection solely on wages and disregarding nonwage benefits. I separately estimate the full model and the nested wage model to compare the implications (biases) of omitting nonwage benefits. I compare the two models' estimates of elasticities and an inequality reduction intervention policy. I find that disregarding nonwage benefits generally causes biases. There are cases when the two models predict very similar outcomes and have close estimates, such as in occupation‐specific elasticities and job transition elasticities. But these special cases are products of canceling biases. In most cases, ignoring nonwage benefits will bias estimates by overestimating the importance of wage in the selection process and by disregarding changes in relative prices between wage and nonwage benefits. (JEL J20, J32, D91)     

LATIN AMERICA'S DECLINING SKILL PREMIUM: A MACROECONOMIC ANALYSIS

The decline in Latin America's skill premium and income inequality during the 2000s was partly driven by an economic expansion that favored low‐skill‐intensive service sectors. Evidence shows inequality becomes countercyclical in the 2000s, and unlike previous expansions, the boom was concentrated on services while manufacturing lagged behind. I build an open economy general equilibrium model that features a low‐skill‐intensive nontradable sector. The model suggests that favorable shocks to commodity prices and international interest rate spreads, such as those that buffeted Latin America in the 2000s, account for about a fifth of the observed decline in the skill premium. (JEL D31, E32, F41, O15, O54)     

NETWORKS AND SELECTION IN INTERNATIONAL MIGRATION TO SPAIN

We offer fresh evidence on the effect of migrant networks on two essential aspects of migration: (1) the total scale of migration and (2) the skill composition of migration. Our analysis is for the remarkable case of Spain, which experienced a full‐blown immigration boom from the mid‐1990s up to the Global Financial Crisis. To accommodate flexible substitution patterns across alternative migrant destinations, we use a three‐level nested multinomial logit model. We find a strong positive network effect on the scale of migration and a strong negative effect on the ratio of high‐skilled to low‐skilled migrants. Simplifying restrictions on the structure of cross‐destination substitutability are rejected by the data. (JEL F22, J61)     

WAGES,RENTS, AND HETEROGENEOUS MOVING COSTS

The model of compensating differentials in regional labor and land markets was formalized by Roback (1982) . The model interprets regional differences in constant quality wages and rents as compensating firms and residents for inter‐regional differences in amenities. This paper extends the Roback model to allow for moving costs which vary among a city's residents and businesses. This modification of the model generates new interpretations of regional differences in rents and wages. The theoretical results suggest that the interpretation of inter‐city rent and wage differentials as compensating is misguided, that such differentials are inappropriate as weights in Quality of Life (QOL) comparisons, and stresses the importance of local housing market parameters in the determination of these differentials. The importance of amenities is retained, but housing supply becomes the main other determinant of regional rents. Housing supply was ignored in the literature following on Roback's initial insight. We show that interactions between amenities and housing supply will bias QOL rankings. Finally, we support the empirical importance of heterogeneous moving costs by demonstrating the effects of exogenous supply constraints on local housing prices. (JEL R31)     

THE PAYOFF TO CONSISTENCY IN PERFORMANCE

This study investigates whether firms are willing to pay higher wages to workers who demonstrate consistent performance than to those whose performance is more volatile. A formal model reflects a production technology view, assuming the law of diminishing marginal product. This model suggests that a more consistent worker produces higher expected output and therefore receives a higher wage. The test of the model uses data from the National Basketball Association. The empirical data support the model: Players whose performances were more consistent than the performances of other players received higher wages on average. (JEL D41, J31, M52, Z20)     

INTERMARRIAGE AND THE LABOR MARKET OUTCOMES OF ASIAN WOMEN

The impact of intermarriage with natives, on labor market outcomes of immigrants, is not homogeneous across ethnic groups. Wages of Asian women are compared with non‐Asians. Both ordinary least squares and instrumental variables estimates of the effects of intermarriage on the wages of Asian women are negative and significant. Non‐Asian women earn a wage premium that becomes insignificant when controls for selection into marriage are introduced. One possible explanation for the intermarriage penalty for Asians is an income effect of having a high‐earning native husband. Intermarriage penalties rise with husband's education. Assimilation patterns of intermarried Asians indicate that they have lower initial wages, market hours, and employment, but exhibit faster rates of growth over their years of stay. The results are robust across Asian subgroups and husband's ethnicity. (JEL J16, J12, J31, J61)     

The Economic Value of Bilingualism for Asians and Hispanics1

This study examines how bilingualism affects the wages of Asian and Hispanic workers using 2000 Census data. In contradiction to the general belief that bilingualism can provide a competitive advantage in the labor market, we find no evidence that 1.5‐generation and U.S.‐born Asian and Hispanic bilingual workers generally have higher wages than their English monolingual co‐ethnics; in some cases, in fact, their wages are significantly lower. In search of specific circumstances under which bilingualism might provide an economic advantage, we also examine interactions of language with such variables as education, employment in the public rather than the private sector, and the size of the population of mother‐tongue speakers. With limited exceptions, we find no sign of greater economic returns to bilingualism. Since bilingualism requires considerable effort to maintain across generations in the United States, we conclude that the virtual absence of economic rewards for it creates pressure for linguistic assimilation.     

Taking Pressure Off Families: Child‐Care Subsidies Lessen Mothers’ Work‐Hour Problems

We use the Philadelphia Survey of Child Care and Work to model the effect of child‐care subsidies and other ecological demands and resources on the work hour, shift, and overtime problems of 191 low‐income urban mothers. Comparing subsidy applicants who do and do not receive cash payments for child care, we find that mothers who receive subsidies are 21% less likely to experience at least one work hour–related problem on the job. Our results suggest that child‐care subsidies do more than allow women to enter the labor force. Subsidies help make it easier for mothers in low‐wage labor both to comply with employer demands for additional work hours and to earn the needed wages that accompany them.     

PAY SECRECY AND EFFORT PROVISION

Pay secrecy is often justified on the ground of concerns about the detrimental consequences of intra‐firm pay comparisons for work morale and performance. Surprisingly, however, there is only limited empirical evidence that the availability of pay comparison information is detrimental for effort provision. In this paper, I study pay comparison effects in a gift‐exchange game laboratory experiment where an employer is matched with two symmetric employees. I compare effort choices made by employees in a “pay secrecy” treatment and in two “public wages” treatments where employees are informed of the wage paid to the co‐worker. In one “public wages” treatment the employer can choose both wages she pays to the employees, while in the other treatment the wage paid to one employee is regulated exogenously. I show that pay disclosure can be detrimental for effort provision if employees are treated unequally. (JEL A13, C92, J31)     

Determinants of the Egyptian labour migration

The objective is to summarize the pattern of Egyptian migration to Arab oil-producing countries (AOPC), to review some factors that are important determinants of labor movement based on theory, and to empirically model the migration rate to AOPC and to Saudi Arabia. Factors are differentiated as to their relative importance. Push factors are the low wages, high inflation rate, and high population density in Egypt; pull factors are higher wages. It is predicted that an increase in income from destination countries has a significant positive impact on the migration rate. An increase in population density stimulates migration. An increase in inflation acts to increase out-migration with a 2-year lag, which accommodates departure preparation. Egypt's experience with labor migration is described for the pre-oil boom, and the post-oil boom. Several estimates of labor migration are given. Government policy toward migration is positive. Theory postulates migration to be determined by differences in the availability of labor, labor rewards between destination and origin, and the cost of migration. In the empirical model, push factors are population density, the current inflation rate, and the ratio of income/capita in AOPC to Egypt. The results indicate that the ratio of income/capita had a strong pull impact and population density had a strong push impact. The inflation rate has a positive impact with a lag estimated at 2 years. Prior to the Camp David Accord, there was a significant decrease in the number of Egyptian migrants due to political tension. The findings support the classical theory of factor mobility. The consequences of migration on the Egyptian economy have been adverse. Future models should disaggregate data because chronic shortages exist in some parts of the labor market. Manpower needs assessment would be helpful for policy makers.     

IQ IN THE PRODUCTION FUNCTION: EVIDENCE FROM IMMIGRANT EARNINGS

We show that a country’s average IQ score is a useful predictor of the wages that immigrants from that country earn in the United States, whether or not one adjusts for immigrant education. Just as in numerous microeconomic studies, 1 IQ point predicts 1% higher wages, suggesting that IQ tests capture an important difference in cross‐country worker productivity. In a cross‐country development accounting exercise, about one‐sixth of the global inequality in log income can be explained by the effect of large, persistent differences in national average IQ on the private marginal product of labor. This suggests that cognitive skills matter more for groups than for individuals. (JEL J24, J61, O47)     

GROWTH OPPORTUNITIES,STRATEGIC SAVINGS,AND THE DOT‐COM BOOM AND BUST

Data from the dot‐com boom‐bust episode suggest that growth opportunities played an important role in explaining firms' financing strategy during this understudied episode. The low leverage of this sector was mainly driven by high growth firms which increased their leverage following the crash despite suffering a much larger fall in their market value. We present a parsimonious dynamic firm financing model where growth opportunities alone can generate the heterogeneous patterns in the financing and performance between high and low growth information technology firms prior to and following the market crash. The calibrated model also sheds light on the role played by monetary policy during that episode. (JEL G32, E22, E5)     

The baby boom of the late 1980s: Life course of a post‐world war II cohort

This study examines the 1980 surge in birthrates in the context of the life course of women of the post‐World War II baby boom. It attempts to describe in more exact detail the role of these women in the 1980 baby boom. Additionally, the study contends that historical time, social time, and life time all have influence on the timing of their reproductive decisions. The data are compiled from reports issued by the U.S. Bureau of Census, the U.S. Department of Health and Human Services, and the Population Reference Bureau. Some attitudinal data are obtained from the 1988 General Social Survey.